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Labels eye iPad app marketplace

Throw major support behind artist-specific apps

DENVER -- When avid technophile Mike Shinoda was approached backstage last year with an idea for developing a Linkin Park iPhone game, the band's co-frontman knew he wanted it to be more than just another run-of-the-mill artist app.

"It was important to us to do something creative and fun," he says. "We didn't want to throw a bunch of songs at the game, slap our name on it and cash the checks."

The result is "8-Bit Rebellion," a soon-to-be-released iPhone game with an iPad version on the way. Whereas most artist-branded games tend to be rhythm-based, "8-Bit Rebellion" is an action game that has users fighting enemies alongside members of the band. The soundtrack features several Linkin Park hits in both standard and 8-bit fidelity, plus an exclusive track, "Blackbirds," for fans who complete the game.

But according to Maryanna Donaldson, creative director of the game's developer, Artificial Life, the real innovation was the degree to which Linkin Park was involved. Each band member helped design a different "district" in which the game takes place, personalized to his individual interests. Shinoda designed the members' avatars and edited every line of dialogue. The process wound up taking the better part of a year, but Donaldson says the result sets a new bar for artist-branded apps.

"For it to be top quality and appealing to the fan, the artist should be very involved," she says.

Meanwhile, the band's label, Warner Bros. Records, is supporting the app's launch with a movie-style trailer that will run in the IGN gaming community as well as virally through Linkin Park's YouTube channel. There will also be a Web site where fans can create and post 8-bit avatars of themselves.

"We're treating this like the release of a Linkin Park album or song," Warner Bros. Records senior vice president of new media Jeremy Welt says.

CANVAS FOR CREATIVITY

For critics of the music industry's approach to the app market, this is the kind of thing they've been waiting for. Labels that just six months ago said they were still evaluating the mobile app opportunity are today pointing to a cohesive strategy around the app and mobile market with a focus on revenue-generating products. Much of that relies on artists who -- inspired by the breakthrough success of Smule's "I Am T-Pain" app (more than 1 million downloads) -- are approaching mobile apps as a canvas of creative expression instead of simply promotion and distribution.

And Apple is upping the stakes for all with the newly introduced iPad, which sports not only new features but also opens up an entirely new class of apps, based on ways developers believe the device will be used. According to a recent comScore survey, music ranks third among the potential uses of the iPad, behind Web browsing and e-mail.

Solidifying the labels' newfound strategy is a simple breakdown of cost versus revenue. Spending as much as $50,000 or more to create what amounts to little more than a mobile expression of an artist's Web site and then giving that away for free isn't a sustainable model. So major labels are instead turning their attention to optimizing their artists' Web sites for mobile browsers and skipping free apps altogether.

"The development costs of launching what are essentially Web content/marketing apps for multiple open-market app platforms are very, very high," Sony Music VP of global account management Sean Rosenberg says. "There are different ways of utilizing the mobile Web to meet our goals."

Instead, the focus is now on paid apps, preferably ones that offer something novel and entertaining. At the music-group level, that means creating games and other apps that can tap a label's entire catalog, such as the "Six String" app recently released by Universal Music Group, which in addition to the six songs included at sale also lets fans buy and download additional tracks over time for 99 cents each. The app costs $5.

At the label level, it's all about the individual artist app. Warner Bros. Records senior VP of digital music Jack Isquith expects artist apps to be a significant revenue generator for the acts involved, more so than simply licensing music to multi-artist apps like "Tap Tap Revenge" or even from the mobile extensions of streaming radio services.

"When we get to 2011 and 2012, the biggest opportunities are going to be having real hits with artist-specific apps," he says.

Research firm Gartner predicts mobile app revenue will increase worldwide from more than $6 billion this year to almost $20 billion by 2013, with the number of apps downloaded jumping from 4.5 billion to more than 21 billion in the same time frame.

NEW OPPORTUNITIES

The advent of the iPad, meanwhile, opens a whole new market for apps and music services to the music industry. Although any iPhone app will work with the iPad, developing iPad-specific versions takes better advantage of the device's more advanced features, such as larger screen size, processing power and high-resolution visuals.

Getting in on the iPad early is significant. While iPhone apps have more than 150,000 other apps to compete with for attention, the iPad launched with slightly more than 3,000 available, and Apple said more than 1 million apps were downloaded to the device during the first weekend it was for sale. Many are music-related -- such as the Shazam music ID service, Pandora's customized Internet radio and new music games like "Tap Tap Radiation" from Tapulous and Smule's "Magic Piano."

What kinds of apps are developed for the iPad depends on how the iPad is used, something of which no one is yet certain. Apps monitoring firm Flurry says more than 40 percent of the apps in development for the iPad are games, so there's likely to be more "8-Bit Rebellion"-type games from artists who want to target iPad users.

Yet while some critics have called the iPad an oversized iPod Touch, there are several important differences between the devices that may lead to other uses. Its larger size has many expecting it to be a less portable device, meaning it will likely be used mostly in the home in areas where consumers don't use their laptop or desktop computers. It also features a larger screen with better resolution for photos and videos, a more sensitive touch screen and longer battery life, so users are likely to interact with content on the iPad longer and in more diverse ways than on the iPhone.

This has developers creating apps for the iPad that are more immersive, or "lean-in," and designed to be used for hours, which is much different from the apps created for the iPhone that are meant to be used for only a few minutes. The driving theory is that the iPad will prove the missing link needed to bring digital entertainment to the living room.

"The iPad is going to broadly redefine home entertainment," says Jeff Smith, CEO of Smule, which raked in around $3 million in revenue last year and in December scored another $8 million in third-round funding. "What we're seeing is the impact of two trends -- gaming and social. So the opportunity as it relates to music is to have a shift in thinking in how you interact with music. What 'Guitar Hero' started will accelerate with the iPad."

ALBUM-ORIENTED

Labels also hope the iPad will spark a return to the album format, specifically for the iTunes LP format.

"It's going to be interesting to see if it can bring that space to life," Sony's Rosenberg says. "Now that they have a device that's better suited for the experience, there is a renewed focus on it. It's been a big part of conversation for major artist releases. It's definitely on the agenda now."

How aggressively that agenda is pursued depends on sales. Apple said the iPad sold more than 300,000 units its opening weekend, which exceeds initial sales of the iPhone. Morgan Stanley analyst Katy Huberty in a recent research note predicted 8 million-10 million iPad shipments this year with sales of 6 million. More than 2 million of those sales should occur in the first three months. Piper Jaffray analyst Gene Munster predicted sales of 4.3 million for the year after analyzing first-weekend results.

One thing is certain -- the music industry is no longer holding back. Whereas it took the better part of a year for the industry to warm up to music apps, the lessons of the last 18 months are already being applied to the iPad.

"We're going to carefully watch for changes in the app marketplace three and six months from now, but we already think it's a business we need to be in," Warner's Isquith says. "It's impossible for us to imagine that anything we see and learn is going to push us away. We're committed to the app marketplace."